European Factors to Watch-Shares seen surging after Fed's move

Reuters Staff

3 Min Read

LONDON, Dec 17 (Reuters) - European shares headed for a sharp rise on Thursday, tracking gains on Wall Street and Asia, after the U.S. Federal Reserve’s move to raise interest rates for the first time in nearly a decade was seen as a sign of confidence in the world’s biggest economy.

The Fed made clear that the 25-basis point rate hike was a tentative beginning to a “gradual” tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target.

“The fact is, the market would have found inspiration that there is no pre-set path for future rate hikes and the word ‘gradual’ was used liberally,” Chris Weston, chief market strategist at IG said.

The Fed’s policy statement noted the “considerable improvement” in the U.S. labor market, where the unemployment rate has fallen to 5 percent, and said policymakers are “reasonably confident” inflation will rise over the medium term to the Fed’s 2 percent objective.

“The rates are still exceptionally low and monetary policy is still being set with a view to encourage growth, not rein growth in,” Christopher Mahon, director of asset allocation research at Baring Asset Management, said in a note.

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